Canada dollar in its steepest decline in 6 months

Tue Sep 30, 2008 5:09pm EDT
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*Canadian dollar dives 1.9 percent against greenback

*Energy production powers Canada GDP higher in July

*Longer-dated bonds have some of their biggest losses ever

TORONTO, Sept 30 (Reuters) - The Canadian dollar staged its biggest single-day drop against the U.S. dollar in more than six months on Tuesday as new-found hope for a $700 billion U.S. financial bailout plan sent the greenback higher across the board.

Canadian bond prices fell victim to a massive unwinding of the previous session's safe-haven bid, with some of the biggest one-day declines ever for longer-dated bonds.

The Canadian dollar ended the North American session at C$1.0642 to the U.S. dollar, or 93.97 U.S. cents, down from C$1.0439, or 95.79 U.S. cents, at Monday's close.

The currency fell 1.9 percent, its biggest one-day decline since March 19. The losses added to the 1.1 percent slide from Monday, erasing gains made earlier in the month and leading to a loss of 0.2 percent in September.

"The magnitude of the moves are staggering," said Matthew Strauss, senior currency strategist at RBC Capital markets. "If you look at the equity markets, the commodity markets -- I mean, gold -- it's moved more than $40 dollars on the day. It's just staggering."

North American equity markets surged higher, erasing a good chunk of the previous day's record losses, as investors bet Washington would eventually pass a plan to stabilize the U.S. finiancial sector.   Continued...